Preliminary
In the FX market we buy or sell currencies. Where the trading mechanism is very similar in most other markets (like stocks). So it is quite simple, and if you already have experience in stock you should not encounter difficulty in doing forex trading. The purpose of forex trading is expected that prices will change where you buy the currency which appreciates in value, so that you profit from the difference in value.
Examples of Trade EUR USD
You buy a pair 10.000 euros at the EUR / USD at the exchange rate of 1:18 +10.000 -11.800 *
1 week later, you switch back to the U.S. dollar 10.000 on the exchange rate of 1.2500. +12.500 -10.000 **
You earn $ 700 profit. 0 +700
The exchange rate / Rate is the ratio of one currency valued against another currency.
For example, the exchange rate of USD / CHF shows how many U.S. dollars can purchase one Swiss franc, or how many Swiss francs you need to buy one U.S. dollar.
Writing partner / forex pair is always written in the pair, like GBP / USD or USD / JPY. The reason why they were written in the pattern of the couple, is because in every foreign exchange transaction we simultaneously buying one currency and selling another.
Here is an example of the exchange rate for the pound versus the U.S. dollar: GBP / USD = 1.7500 The first currency listed on the left of the slash ("/") is known as the base currency (in this example, the British pound sterling), while the second on the right is called the counter currency (in this example, the U.S. dollar).
When buying, the exchange rate tells how much you should pay to buy one unit of base currency. In the example above, you have to pay 1.7500 U.S. dollar to buy 1 British pound.
In forex trading, you will buy a pair / partner if you believe that the base currency will rise or rise. And vice versa, you will sell pairs if you think the base currency will depreciate (go down) relative to the counter currency.
Forex Transactions
Buy / Sell (Buy / Sell)
In forex trading terms which are commonly used are:
Buy or Long or Buy: If you think the base currency will go up.
Sell or Short or Sell: If you think the base currency will go down.
Difference of Supply and Demand (Bid / Ask Spread)
Quote (Bid) is the price at which you as a trader will sell the base currency.
Request (Ask) is the price at which you as a trader will buy the base currency.
The bid price is always lower than the demand, and the excess is often referred to as the Spread. In forex trading broker in this difference are usually taken advantage as the cost of their services.
Close / Close Transaction
Once you buy a pair, of course, you will be selling more to realize profits. Well in this forex popularly called the Close.
So:
If You Buy At first, to close the mean CLOSE (Sell)
If you Sell Initially, to close the mean CLOSE (Buy)
Good to here you have studied the three main forex trading are:
Buy / Sell, Close, Price Bid / Ask, and Spread
Next, let's see how we could make money trading forex (Maybe this is who you've been waiting from earlier)
Profits / money from forex trading
Let's look at an example of a public offering prices shown in sebuat online forex trading system.
GBP / USD
BID ASK
1.2800 1.2804
SELL BUY
Seen above that the forex spread on GBP / USD, the price bid is 1.2800 and the ask price is 1.2804.
Such as when you estimate the value of GBP will strengthen / ride.
Then you take the position BUY / buy GBP / USD at 1.2804
After some time, the price change (see display below)
GBP / USD
BID ASK
1.2820 1.2824
SELL BUY
Here we can see that what you predicted correctly. And the GBP / USD moves up.
Well, now is your chance to be able to realize profits by doing CLOSE (Sell), so Close (Sell) GBP / USD at 1.2820
So from a trade which had the advantage you get is:
1.2820 - 1.2804 = 16 Pip (Pip is the smallest price movement available in the currency).
Good, now the question is, what if the price of GBP / USD moves against / not according to your estimates. (See display below)
GBP / USD
BID ASK
1.2770 1.2774
SELL BUY
If you do CLOSE (sell) at this position. Means:
1.2770 - 1.2804 = -34 Pip (you lose 34 Pip)
Well, when you do a CLOSE, it's up with your analysis.
Is the GBP / USD will continue to fall (preferably close now to minimize losses), or you believe GBP / USD will go up (Do not close now, hold up again for a profit (+))
Simple is not it ...
So Pip which means you've got here is a profit / money for YOU.
Furthermore, What is the value of money acquired from Pip.??
Pip will be equivalent to the money / dollar, depending on the number of lots, large contracts, as well as the leverage you are using.
Illustration of the calculation assuming a standard which uses a contract.
Profit ($) = Difference X Contract Size ($) X Lot
So from the example above, the profit ($) = 1.2820 - 1.2804 (16 pip) x 100,000 ($) x 1 = $ 160
The advantage for us today is, the average of all platform / broker trading software has made the process automatic seacara above calculation.
So that we can easily find out the equivalent of our profits without the need to bother to count anymore.
